Record gold price doubles Harmony’s quarterly earnings

Harmony Gold more than doubled its earnings in the fourth quarter of 2010, boosted by record gold prices.

The company said yesterday that it was on track to meet its long-term production targets as well.

Its shares were down 0.5 percent to R79.41 yesterday morning amid concerns over rising costs. But later in the day it regained momentum, closing 0.1 percent up at R79.84.

Total cash costs rose to $979 an ounce (R228 100 a kilogram) in the quarter from $974 an ounce in the previous quarter.

“From a South African perspective, we’re not really cost-effective compared to elsewhere on the globe,” said Abri du Plessis, the chief investment officer at Gryphon Asset Management. “We have probably seen the best of the commodity price and I’m not that bullish anymore.”

Harmony chief executive Graham Briggs said the company was on track to meet its long-term as well as next quarter’s output targets.

“The company has turned the corner – unprofitable operations were closed and our longer-life lower-cost operations are profitable and sustainable,” he said.

Production for the 2011 financial year would most likely be between 1.45 million and 1.5 million ounces, he said.

Harmony said headline earnings a share totalled 69c for the October to December quarter, compared with 33c in the previous three months.

Output for the quarter under review dipped by 4 percent from the preceding three months to 323 275 ounces after an accident disrupted production at its Kusasalethu mine near Carletonville in the North West in October.

The average gold price received for the quarter rose 12 percent to a record $1 371 an ounce.

Expectations for gold’s performance have risen sharply, with a survey of 65 leading analysts, traders and fund managers predicting the precious metal would average $1 450 an ounce this year, well above its record high of $1 430.95 an ounce. Gold fixed at $1 347.50 an ounce (R313 787 a kilogram) in London yesterday afternoon.

Harmony’s shares are up nearly 12 percent in the past year, underperforming a 25 percent rise in the JSE’s Top40 index of blue chips. - Reuters